Will we stay or will we go?

Trevor Greetham

4 December 2018

The probability of the UK remaining in the EU has just increased. With Brexit events moving at such a startling pace and less than a week to go before Parliament votes on Theresa May’s Withdrawal Agreement, we believe investors should ensure their portfolios are prepared for every eventuality.

The advocate general’s preliminary ruling suggests the UK could hold a referendum on the final deal and remaining on current terms is a real possibility.

On the other hand, with Theresa May’s Withdrawal Deal unlikely to pass in parliament, the probability of the UK leaving with No Deal has also increased markedly. We’d expect sterling to rally strongly if the UK remains in the EU but to suffer sharp declines on a disruptive and economically damaging exit. With this in mind, it’s not surprising that sterling volatility is at its highest level since the 2016 referendum.

Swings in the pound can have a very large impact on investment returns. Investors with a low appetite for risk should avoid high levels of foreign currency exposure while we balance equity exposure with commercial property in multi asset funds for investors with a higher appetite for risk. Equities should do better on a disruptive exit with a weak pound. We’d expect property to do better if the UK stays in or close to the EU.

Seems like there’s still all to play for. From an investment point of view, Brexit is about risk control rather than trying to predict the outcome.

The probability of the UK remaining in the EU has just increased. With Brexit events moving at such a startling pace and less than a week to go before Parliament votes on Theresa May’s Withdrawal Agreement, we believe investors should ensure their portfolios are prepared for every eventuality.

The advocate general’s preliminary ruling suggests the UK could hold a referendum on the final deal and remaining on current terms is a real possibility.

On the other hand, with Theresa May’s Withdrawal Deal unlikely to pass in parliament, the probability of the UK leaving with No Deal has also increased markedly. We’d expect sterling to rally strongly if the UK remains in the EU but to suffer sharp declines on a disruptive and economically damaging exit. With this in mind, it’s not surprising that sterling volatility is at its highest level since the 2016 referendum.

Swings in the pound can have a very large impact on investment returns. Investors with a low appetite for risk should avoid high levels of foreign currency exposure while we balance equity exposure with commercial property in multi asset funds for investors with a higher appetite for risk. Equities should do better on a disruptive exit with a weak pound. We’d expect property to do better if the UK stays in or close to the EU.

Seems like there’s still all to play for. From an investment point of view, Brexit is about risk control rather than trying to predict the outcome.

Past performance is no guide to the future. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.